AI won't transform your business unless you transform it first

Businesses must first transform their own processes before AI can deliver significant benefits, according to experts. Simply adding AI to existing systems will not yield the dramatic changes that providers promise. Denis Torii, a vice president analyst at Gartner, explains that this transformation is not just an IT matter; it's an organizational one requiring the organization to adapt.

Currently, many companies are using AI in various forms, such as chatbots and software coding agents, but the financial impact remains limited. Only 37% of respondents reported AI contributing to their organization's earnings before interest and tax (EBIT), a figure unchanged from the previous year, according to a McKinsey report.

To truly benefit from AI, organizations need to shift their leadership mindset and adopt a new organizational ethos. Gabby Fredkin, head of analytics and insights at Adapt, emphasizes that this shift involves rethinking the core of the organization, its purpose, and the roles it plays. Successful AI implementation often stems from leadership with a strong conceptual understanding and a willingness to foster innovation.

The McKinsey report highlights that high-performing organizations redesign workflows enabled by AI rather than simply inserting AI into existing processes. However, this transition can be more challenging for certain organizations than others, depending on their cost factors. AI-related operating costs are beginning to constrain its use for about one in five organizations, even as most expect increased AI investments.

Analyst John Reed, co-founder of tech platform diginomica, suggests that companies should look beyond traditional processes to capture new revenue streams. AI could prove valuable in complex, mission-critical tasks that humans find difficult to perform in real time, but adoption will take time as companies navigate fragmented data and legacy systems.

The trillion-dollar ROI challenge is significant, with worldwide spending forecast to reach $2.7 trillion this year, up 49.5% annually. However, the industry needs to earn $6 trillion in annual revenue by 2031 to justify the capital deployed, according to a report by consultancy Bain.